Imminent rate cut gossip sparks fixed-rate mortgage rate reductions |
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Sun, 17 Jul 2005 18:35
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LONDON: It appears that the second half of the summer is going to be a good one for homebuyers. For the imminent and inevitable rate cuts by the Bank of England has prompted several institutions to lower their fixed-rate mortgage rates.
Nationwide was the first lender to drop rates on its two-year fixed plan to 4.39 percent. Halifax followed suit and has chopped its fixed-mortgage rate by 0.40 percent. Commenting on this move, Tim Anson, who is the head of mortgage products at Halifax, said, "For borrowers who want the peace of mind and certainty of payment that a fixed rate mortgage offers, some of these deals will be very tempting indeed." However, this loan has a £599 arrangement fee and can be availed only through third-party brokers.
First Direct has also taken note of these moves by lenders and has cut its three-year fixed-rate offset mortgage plan by 0.36 percent. The Chelsea Building Society has reviewed its entire loan segment.
Commenting on these moves by top lenders, Ian Giles, of Purely Mortgages, said, "The money markets are expecting rates to be cut not just once but twice in the next few months. This would take the base rate below 4.5 per cent." He has in fact hit the nail on the head, as the markets hope that the much-anticipated rate cut will have to be effected by the BoE in August.
The MPC had remained firm last week even in the face of the terrible bombings, but analysts say that it cannot hold out much longer. "Many people cannot make up their minds whether they should take a fixed rate now, a base-rate tracker that may be cheaper in a few months’ time or wait a little longer in case there are better fixed rates to come," says David Bitner, head of mortgages at Bradford & Bingley. However, he warns that people should not wait too long, "The extra cost of the standard variable rate while waiting for a slightly better deal is money wasted," he points out.
Analysts also say that the rate cuts would be a boost to the housing market which has been very gloomy this year, Simon Tyler of mortgage broker Chase De Vere Mortgage Management says, "If rates do continue to fall into next year and we see a base rate of around 3.5-4 per cent again, then the effect on house prices could be quite dramatic."
Questions remain as to if the BoE and the MPC are listening or if other influences, such as rising inflation will prevent any dramatic rate cuts.
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